Passage 3:
People will invest in education whenever they are granted the economic freedom to fully enjoy its benefits. Again, this is for the obvious reason that the return on education increases as the level of economic freedom rises. When people, thanks to lower tax rates, are allowed to retain most of the higher income that they gain from each incremental level of education, it makes eminent sense to invest in education. On the other hand, when the government decides to tax the higher income of educated individuals at even higher rates, it makes very little sense to invest in educating oneself further. The same incentives apply to parents who decide on whether to invest in their children's education.

With reference to the above passage, the following assumptions have been made:
1. Lower tax rates in a country invariably translate into greater investments in higher education.
2. Investment in the education of children ensures their economic freedom.
3. Economic freedom has a positive impact on building up human capital.

Which of the above assumptions is/are valid?

Question

Passage 3:
People will invest in education whenever they are granted the economic freedom to fully enjoy its benefits. Again, this is for the obvious reason that the return on education increases as the level of economic freedom rises. When people, thanks to lower tax rates, are allowed to retain most of the higher income that they gain from each incremental level of education, it makes eminent sense to invest in education. On the other hand, when the government decides to tax the higher income of educated individuals at even higher rates, it makes very little sense to invest in educating oneself further. The same incentives apply to parents who decide on whether to invest in their children's education.

With reference to the above passage, the following assumptions have been made:
1. Lower tax rates in a country invariably translate into greater investments in higher education.
2. Investment in the education of children ensures their economic freedom.
3. Economic freedom has a positive impact on building up human capital.

Which of the above assumptions is/are valid?

Accepted Answer

Correct Option: (c) 3 only Assumption 1: Invalid, the passage states that people invest in education when taxes are lower and returns are higher, but using the word 'invariably' (निरपवाद रूप से) makes it too absolute, as other factors also influence education investment. Assumption 2: Invalid, the passage discusses parents and individuals investing in education based on economic returns and tax rates, but does not claim that education ensures economic freedom (rather, economic freedom encourages investment in education). Assumption 3: Valid, the passage establishes that economic freedom (higher retention of income through lower taxes) incentivizes investments in education, which directly builds up human capital. Therefore, only assumption 3 is valid. Option (c) is correct.

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